Part of what gave black scholes merton its

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Part of what gave Black-Scholes-Merton its performative power was its linking to the Chicago derivatives exchanges, with their traditions of price transparency and competition amongst market-makers. Take away this linkage, and patterns of option pricing no closer to Black-Scholes-Merton than those of a century ago can still prevail today, as Moore and Juh demonstrate for the case of options sold to retail investors in South Africa: ―Mispricing on the modern JSE [Johannesburg Stock Exchange] is at a comparable level with mispricing in the early twentieth century‖ (Moore and Juh forthcoming, p. 21). Furthermore, what is probably unusual about the case of option theory (one cannot be entirely sure about its frequency until far more empirical work is done) is the existence of a single, stable, canonical form of the theory: the Black-Scholes-Merton model. Option theory developed and diversified, but there remains a sense in which the Black-Scholes-Merton model is the benchmark. The very conceptualization of the empirical phenomenon that undermines it the post-1987 volatility ―skew‖ –is
43 testimony to the model‘s canonical role: it is a skew with respect to the Black-Scholes-Merton flat-line relationship between strike price and implied volatility. If an area of economics is too diverse and is changing too fast, empirical enquiry into Barnesian performativity and counterperformativity becomes very difficult. If different theories or models are used by different participants, and if they are frequently discarded and replaced, then their use may have effects on their ―truth,‖ but identifying those effects will be problematic: it will be difficult to know where to start.24The circumstances that make the enquiry feasible in the case of option theory a widely-used canonical model, and decades of empirical tests of the model are probably not unique, but they may not be common. Although empirical investigations of Barnesian performativity and counterperformativity may therefore be difficult, one virtue of the notions is that in respect to an economic theory or model they prompt us to ask a question additional to the two natural questions (that is, is the theory or model analytically tractable, and does it adequately represent some economic process?) The additional question is this: what would be the effects of the widespread use of the theory or model? That third question was, for example, asked prior to 1987 of the use of option theory in portfolio insurance, but not often enough and influentially enough (see MacKenzie 2004). 24These difficulties would attend any investigation of whether post-1987 patterns of option pricing are Barnesian performative effects of models other than Black-Scholes-Merton.
44 It is possible that there are circumstances in which the answer to the third question should be given greater weight than the answers to the other two. That, for example, was implicitly the post-1987 judgement of the Options Clearing Corporation, the ultimate

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